The New Zealand Dollar (NZD) pushed higher against the US Dollar (USD) on Monday, with NZD/USD trading near 0.5905 during the Asian session. The upside momentum comes after upbeat Chinese data improved market sentiment, while traders remain cautious ahead of key US economic developments.
China’s PMI Gives Kiwi a Lift
Fresh figures from the Caixin Manufacturing PMI showed an unexpected rebound to 50.5 in August, up from July’s 49.5 and beating forecasts of 49.5. The return to expansion territory highlights stronger demand in China, a crucial trading partner for New Zealand, and gave the Kiwi Dollar a much-needed boost.
Trade Tensions Limit Upside
Despite the positive news, concerns over US-China trade relations kept gains in check. Last week, US President Donald Trump threatened steeper tariffs on China if rare-earth exports were restricted. Adding to the uncertainty, a US federal appeals court ruled that Trump’s sweeping reciprocal tariffs on multiple nations—including China—were unlawful, keeping global trade policy in focus.
Fed Policy Outlook Adds Pressure on USD
The US Dollar continues to face downside risks as speculation grows that the Federal Reserve (Fed) will begin cutting interest rates in September. San Francisco Fed President Mary Daly confirmed that policymakers stand ready to lower borrowing costs soon, while Fed Governor Christopher Waller signaled willingness to back deeper cuts if labor market data weakens further.
Friday’s US PCE inflation report showed annual core inflation holding at 2.9%, while headline inflation stayed at 2.6%, in line with forecasts. With inflation elevated but stable, rate-cut expectations remain strong, weighing on the Greenback.
Outlook for NZD/USD
The Kiwi holds firm above 0.5900, supported by China’s stronger data and Fed rate-cut bets. However, renewed trade tensions between Washington and Beijing could cap further upside. Traders now shift focus to upcoming US PCE inflation data and global risk sentiment, which will set the tone for the pair’s next move.
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